According to the Census Bureau, starts rose 9.8% an annualized pace of 1.174 million. Building permits rose 7.4% at an annualized pace of 1.343 million.

Economists had estimated that in June, starts rose 6.7% at an annualized pace of 1.106 million, and building permits fell 8% at an annualized pace of 1.150 million.

The jump was supported by rising consumer confidence, a strong jobs market, and improvement in the supply of mortgage credit, according to Peter Ciganik, managing director of GTIS Partners, in a note to Business Insider.

In a note to clients after the release, Pantheon Macroeconomics' Ian Sheperdson said that the numbers were "hugely distorted due to a tax-break deadline."

"All the action is in the multi-family components, because activity has been massively distorted by a surge in activity in New York ahead of the scheduled expiration of a tax-break for multi-family developments on June 15," he wrote. "We knew from media reports that activity soared before the deadline, but we didn't know if that would be enough to offset the drop-off afterwards. Clearly, it was."